CY Oriental Holdings Ltd. Reports Fourth Quarter and Year End Results



    VANCOUVER, April 30 /CNW/ - CY Oriental Holdings Ltd. (TSX-V: CYO) ("CY"
or the "Company"), a value-added supplier of apparel and fashion products to
leading international brands and retailers, today announced its financial
results for its fourth quarter and fiscal year ended December 31, 2006. All
figures are reported in Canadian dollars, unless specified otherwise.
    "Fiscal 2006 was marked by increasingly strong demand from our
world-class customer base, further highlighting the capacity constraints at
our existing Shanghai manufacturing facility," said Ping Chen, Chairman and
CEO of CY Oriental Holdings Ltd. "While we were able to achieve revenue growth
of 31% for the fourth quarter compared to the fourth quarter of 2005 due to
our focus on higher end fashion products, our revenue for the year was once
again limited by our capacity. To address this limiting factor to our growth,
in 2006 we embarked on a massive capacity expansion plan, which will better
position the Company to capitalize on the explosive growth in the Chinese
apparel export market."

    Financial Results for the Fourth Quarter and Fiscal Year

    Revenue increased 31.1% to $11.9 million for the fourth quarter of fiscal
2006 (as compared to the fourth quarter of fiscal 2005) and 1.9% to
$43.2 million for the fiscal year. While revenue growth for both periods was
constrained by capacity limitations at the Company's existing Shanghai
manufacturing facility, growth in the fourth quarter was attributable to the
Company's progress in transitioning its product offering more towards
higher-end fashion items.
    During the year, a subsidiary of the Company entered into an investment
consulting service with Winning Giant Investments Limited in connection with
foreign exchange hedging and investment services, pursuant to which the
Company paid a deposit of $4 million. In connection with the Company's
qualifying transaction, both parties agreed to terminate the agreement in
October 2006. The deposit with interest was repaid to the Company in November
2006. The interest received was recorded as other income on the financial
statements and is of a non-recurring nature.
    Gross profit increased 6.1% to $2.7 million for the quarter (as compared
to the fourth quarter of fiscal 2005), but decreased 5.2% to $11.9 million for
the fiscal year. Gross margin as a percentage, while still higher than the
industry average for comparable Chinese apparel manufacturers, declined to
22.8% for the quarter compared with 28.2% for the fourth quarter of 2005, and
declined to 27.5% for the year compared with 29.5% for fiscal 2005. The lower
rates for the quarter and the year were primarily attributable to the
appreciation of the Chinese RMB, which is the currency used to pay for most of
the Company's cost of goods sold. Excluding the impact of currency
fluctuations, gross margin as a percentage of sales was 23.8% for the quarter
and 30.5% for the fiscal year.
    EBITDA(1) decreased 69.5% to $0.6 million for the quarter (as compared to
the fourth quarter of fiscal 2005) and 28.8% to $7.1 million for the fiscal
year. Profitability was impacted by expenses in connection with the Company's
qualifying transaction and public listing, the addition of export quota costs
that were non-existent in fiscal 2005, and the appreciation of the RMB and the
Canadian dollar. The decrease was also partially attributable to higher
borrowing costs during the quarter and the year to support construction of the
new manufacturing facility in Tengzhou in addition to general working capital
requirements. Subsequent to year end, on March 16, 2007, the Company announced
that it had established new credit facilities, which are an improvement to the
Company's capital resources, and with pricing that is more favourable to the
Company than its prior credit facility.
    Net income for the quarter was $0.2 million, or $0.02 per share, compared
with $1.6 million, or $0.16 per share, for the same period of fiscal 2005. Net
income for the year was $4.5 million, or $0.44 per share, compared with
$8.9 million, or $0.88 per share, in the same periods of 2005. Earnings per
share were calculated based on 10,100,000 shares issued and outstanding as at
December 31, 2006.

    Update on Tengzhou Construction

    The Company also announced that construction of its new state-of-the-art
manufacturing facility in Tengzhou has been completed, with test-runs now
being conducted. The Tengzhou facility, which is the Company's second
manufacturing facility, is expected to commence bulk production by the end of
May 2007. The new facility is expected to be fully operational by the end of
fiscal 2007. Once fully operational, the Tengzhou facility will significantly
expand the Company's production capacity, adding another eight million pieces
of apparel that can potentially be manufactured per annum.

    Launch of Corporate Website

    The Company also announced that it has launched its new corporate
website, www.cyoriental.com. The website was designed to elevate the Company's
image and deliver information more effectively to its various current and
potential customers, shareholders, employees and the general public. The
website focuses on providing content about the Company, its product offering,
financial data and other investor relations information.

    Other Developments

    The Company also announced today that Mr. Ping Chen, Chairman and Chief
Executive Officer, will be assuming the role of President of the Company
effective June 4, 2007, at which time current President, Chris Chen, will
assume the title of Vice President, Business Development.
    "The transition from a privately owned China-based manufacturer to a
publicly traded, Canadian incorporated company was a significant undertaking,
of which Chris Chen played a vital role," said Mr. Ping Chen. "Now that this
transition has been completed, Chris and I have decided that the role of Vice
President, Business Development is more suiting to Chris' interests on a go
forward basis. As Vice President, Business Development, Chris will continue to
play an important role in driving our future success, as we will surely
benefit from his experience in the North American market.

    Outlook

    "Looking ahead, we expect 2007 to be a pivotal year for CY," added    
Mr. Ping Chen. "With significant orders on hand from both new and existing
customers, we look forward to our Tengzhou facility commencing production and
the expansion project at our existing Shanghai facility getting underway. In
addition to our capacity expansion plans, we look to broaden the range of
value-added services we offer to our customers, and transition our product mix
more towards higher margin items. The second phase of our Tengzhou project
will involve bringing in-house certain production activities that we currently
outsource, including embroidery and fashion washing, both of which are
features that command significantly higher margins."

    Notice of Conference Call

    At 8:30 a.m. Eastern Time, on Tuesday, May 1, 2007, the Company's
management team will host a conference call to discuss the financial results
for the quarter and the fiscal year. To listen to the call by telephone, dial
416-646-3095 or 1-800-588-4942. To ensure participation, please connect
approximately 15 minutes prior to the scheduled start time. Anyone unable to
listen to the call can access a replay until Tuesday, May 8, 2007 at midnight
Eastern Time. To listen to the replay, dial 416-640-1917 or 1-877-289-8525 and
enter the reservation number 21230935 followed by the number sign.
    A live audio webcast of the Company's conference call will be available
at http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1844480. Please
connect at least 15 minutes prior to the conference call to ensure adequate
time for any software download that maybe required to join the webcast. The
webcast will be archived at the above web site for 90 days.

    Financial Statements

    For convenience, this press release includes the Company's Fiscal Year
End Consolidated Balance Sheet, Statement of Operations and Statement of Cash
Flows.



    
                         CONSOLIDATED BALANCE SHEET


    As at December 31                         (Expressed in Canadian dollars)

                                                     2006               2005
                                                        $                  $
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents                     770,688            371,882
    Restricted cash                               116,866                  -
    Trade receivables                          18,030,216         13,326,913
    Other receivables                             240,117             96,119
    Amounts due from a related party               27,491                  -
    Loan receivable                             2,559,172                  -
    Inventories                                 1,562,861          1,786,250
    Prepayments                                 1,300,908          1,310,225
    -------------------------------------------------------------------------
    Total current assets                       24,608,319         16,891,389
    -------------------------------------------------------------------------
    Rental property                             3,756,489          3,858,692
    Property, plant and equipment               3,421,974          3,276,139
    Construction in progress                   15,993,693          8,520,381
    Deposit for land use right                  3,573,180                  -
    Deposit for plant and machinery               149,300                  -
    -------------------------------------------------------------------------
    Total assets                               51,502,955         32,546,601
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Short-term bank loans                       9,916,880          2,023,004
    Loan payable                                8,521,370                  -
    Trade payables                              2,847,987          3,621,583
    Advances received                                   -            541,731
    Other payables                              1,409,414          1,429,750
    Accrued liabilities                           815,060            433,681
    Amounts due to related parties                112,639          2,237,546
    -------------------------------------------------------------------------
    Total liabilities                          23,623,350         10,287,295
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Commitments and contingent liabilities

    Shareholders' equity
    Share capital                               7,713,904          7,713,904
    Cumulative translation adjustment          -1,500,487         -2,643,656
    Reserves                                    5,303,068          4,286,716
    Retained earnings                          16,363,120         12,902,342
    -------------------------------------------------------------------------
    Total shareholders' equity                 27,879,605         22,259,306
    -------------------------------------------------------------------------
    Total liabilities and shareholders'
     equity                                    51,502,955         32,546,601
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                     CONSOLIDATED STATEMENT OF OPERATIONS

    Years ended at December 31                (Expressed in Canadian dollars)

                                                     2006               2005
                                                        $                  $
    -------------------------------------------------------------------------

    Revenue                                    43,203,888         42,417,436
    Cost of sales                             -31,327,086        -29,883,357
    -------------------------------------------------------------------------
    Gross profit                               11,876,802         12,534,079
    Rental income                                 401,703            366,428
    -------------------------------------------------------------------------
                                               12,278,505         12,900,507

    Selling and distribution expenses          -2,005,460           -813,309
    Administrative expenses                    -2,747,795         -2,352,773
    Bad debt expenses                            -531,483                  -
    Foreign exchange loss                        -659,854           -306,899
    -------------------------------------------------------------------------
    Income from operations                      6,333,913          9,427,526

    Other income (expense)
    Borrowing costs                            -1,396,771           -207,795
    Public listing expenses                    -1,276,363            -62,646
    Realized exchange loss on distribution
     to shareholders                                    -           -298,760
    Other income                                  816,351                  -
    -------------------------------------------------------------------------
    Income before income taxes                  4,477,130          8,858,325
    Income tax expense                                  -                  -
    -------------------------------------------------------------------------
    Net income                                  4,477,130          8,858,325
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share - basic and
     fully diluted                                   0.44               0.88
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number of
     common shares outstanding
     - basic and fully diluted                 10,100,000         10,100,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENT OF CASH FLOWS

    Years ended at December 31                (Expressed in Canadian dollars)

                                                     2006               2005
                                                        $                  $
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Net income for the year                     4,477,130          8,858,325
    Items not involving cash:
      Depreciation of property, plant and
       equipment and rental property              610,772            656,395
      Realized exchange loss on distribution
       to shareholders                                  -            298,760
      Bad debt expenses                           531,483                  -
    Changes in non-cash working capital items:
      Trade receivables                        -5,019,543         -5,174,772
      Inventories                                 269,370           -882,097
      Other receivables                           -93,103          2,186,750
      Prepayments                                   2,316            -38,778
      Trade payables                             -851,674          1,068,398
      Advances received                          -533,285         -1,615,273
      Other payables                              -64,624           -356,800
      Accrued liabilities                         387,449           -141,144
    -------------------------------------------------------------------------
    Cash provided by (used in) operating
     activities                                  -283,709          4,859,764
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Repayment on advances to related parties    4,410,408          9,495,704
    Advances to a related party                   -27,491                  -
    Loans to unrelated parties                 -2,439,783                  -
    Acquisition of property, plant
     and equipment                               -435,687            -75,219
    Additions in construction in progress      -6,844,931         -6,969,591
    Deposit for land use rights                -3,404,381                  -
    Deposit for machinery                        -142,248                  -
    Sales proceeds from disposal of
     investments                                        -             99,740
    -------------------------------------------------------------------------
    Cash provided by (used in) investing
     activities                                -8,884,113          2,550,634
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Advances from banks                         9,493,923          7,395,000
    Repayments to banks                        -1,991,465        -10,648,800
    Loans from other financial institutions     8,410,263                  -
    Distribution to shareholders               -6,249,189                  -
    Restricted cash                              -113,885            132,314
    Dividend paid                                       -         -4,437,036
    Share issued for cash                               -              1,000
    -------------------------------------------------------------------------
    Cash provided by (used in) financing
     activities                                 9,549,647         -7,557,522
    -------------------------------------------------------------------------

    Effect of changes in exchange
     rates on cash                                 16,981             60,159

    Increase (decrease) in cash and
     cash equivalents                             398,806            -86,965
    Cash and cash equivalents, beginning
     of year                                      371,882            458,847
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of year        770,688            371,882
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental disclosure of cash flow
     information:
    Cash paid for interest                      1,136,133            199,444
    Cash paid for income taxes                          -                  -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    About CY Oriental Holdings Ltd.

    CY Oriental Holdings Ltd. is a Canadian incorporated, China-based
manufacturer and value-added supplier of apparel and fashion products to
leading international brands and retailers, including department stores. CY
owns and operates a manufacturing facility in Shanghai, China, and is readying
its newly constructed facility in the city of Tengzhou, China, for commencing
production. The Company's ready-made products include a broad range of
high-quality garments, including woven casual wear, woven formal wear, denims
and knit junior sportswear.

    (1) EBITDA is a non-Canadian GAAP financial measure.  CY Oriental
calculates it by adding (1) net income, (2) borrowing costs reported on the
income statement, (3) depreciation expenses reported as part of the cost of
sales, (4) depreciation expenses reported as part of the general and
administrative expenses on the income statement and (5) foreign exchange loss
reported on the income statement. EBITDA is not a recognized measure under
Canadian GAAP and does not have a standardized meaning prescribed by Canadian
GAAP and therefore it is unlikely to be comparable to similar measures
presented by other issuers. However the Company believes that, in addition to
net income, EBITDA is a useful complementary measure of cash available prior
to borrowing costs, depreciation expenses and foreign exchange losses.

    Forward-Looking Statements

    This press release contains "forward-looking" statements that are subject
to important risks, uncertainties and assumptions relating to the Company and
the environment in which it operates, which are based on the Company's
operations and management's estimates, forecasts and projections. Words used
in this press release such as "plan", "budget", "believe", "expect",
"anticipate", "estimate", "intend", "may", "project", "will", "would" and
similar expressions may identify such forward-looking statements.
    Forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause actual results, performance or achievements
to be materially different from any results, performance or achievements
anticipated or implied by the forward-looking statements.  There is no
assurance that forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those anticipated in
such statements.  Accordingly, investors should not place undue reliance on
forward-looking statements.  Such statements reflect management's view of
future events and are subject to certain assumptions, risks and uncertainties.
    Such assumptions include assumptions based on the growth of the apparel
industry and the success of the Company's marketing and expansion plans. The
following factors could cause material differences in results from those
expressed or implied in any forward-looking statements set out herein: changes
in consumer spending patterns; consumer preferences towards product offerings;
reliance on the U.S. market; reliance on major customers; the sustainability
of customers' orders; the Company's ability to develop new merchandise;
general economic conditions and normal business uncertainty; the potential
impact on the retail environment of national and international security and
health concerns; the impact of competition and pricing; competitive conditions
in the industries in which the Company participates; changes in weather
patterns; operating risks; seasonality of the retail industry; political
instability; transportation cost increases; the success or failure of the
Company's business plan; the ability of the Company to successfully execute
its growth strategy and whether such strategic initiatives will yield the
expected benefits; uncertainties related to the Tengzhou facility; the ability
to retain, hire and train key personnel; relationship with suppliers;
fluctuations in foreign currency exchange rates and raw materials prices;
interest rate fluctuations and other changes in borrowing costs; potential
deterioration of the Company's financial position; reliance on banking
facilities; import/export controls and inspection; insurance risks;
environmental protection; conflicts of interest; and changes in laws, rules
and regulations applicable to the Company and other risks associated with
doing business in China (such as state ownership, government intervention,
foreign investment controls, repatriation of profits and controls over
currency conversion, taxes, shareholders' rights and enforcement of judgments,
permits and business licences, a developing legal system, acquisition and
appropriation of land use rights, inflation, recent regulations relating to
cross-border mergers and acquisitions and relating to establishment of
offshore special purpose companies), as well as the assumptions and risks set
out under "Risk Factors" in the Company's Management Discussion & Analysis as
filed on SEDAR on April 30, 2007.
    Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, our actual results could differ
materially from those anticipated in these forward-looking statements. 
Although management believes that its expectations are based on reasonable
assumptions there is no assurance that these expectations will materialize.
    The Company does not assume any obligation to update this forward looking
information, except as may be required by law.




For further information:

For further information: John Yuan, Senior Vice President, CY Oriental
Holdings Ltd., Tel: (604) 633-9833, Email: john@sh-maoyuan.com; Trevor
Heisler, Investor Relations, The Equicom Group, Tel: (416) 815-0700 ext 270,
Email: theisler@equicomgroup.com

Organization Profile

CY ORIENTAL HOLDINGS LTD.

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